Accounting principle assumes that, a company will continue to exist long enough to carry out its objectives and commitments and will not liquidate in the foreseeable future.
Which of the following audit procedures is most likely to assist an auditor in identifying conditions and events that may indicate substantial doubt about an entity's ability to continue as a going concern?

• A. Reconciliation of interest expense with debt outstanding.
• B. Review of compliance with terms of debt agreements.
• C. Confirmation of bank balances.
• D. Confirmation of accounts receivable from principal customers.

An employee of an insurance company processed a fraudulent policy loan application for an amount less than the established level requiring supervisory review. The employee then obtained the cheque and cashed it by forging the endorsement. To prevent the loan's appearance on a subsequent policyholder statement, the loan amount was transferred to a "suspense" account. Which of the following should expose this situation at the earliest date?

• A. The use of pre-numbered checks which are periodically accounted for.
• B. Regular reconciliation of the "suspense" account performed by an independent employee.
• C. A computer report identifying unusual entries to the suspense account.
• D. An annual internal audit.

The management of Tory Bank Ltd suspects that a bank loan officer frequently made loans to fictitious companies, disbursed loan proceed to his wife's accounts, and then the loan has been written-off as irrecoverable. Some significant facts about the loan officer include
A high standard of living, explained as the result of sound investments and not taking vacations
An expensive personal car obtained through business contacts
Gasoline and repair bills submitted for an assigned company car that is higher than company average (mileage logs were submitted on a quarterly basis)
Marked annoyance with questions from auditors
The most appropriate trend analysis to indicate this potential fraud is

• A. Accumulation of unpaid vacation days.
• B. Automobile operating expenses by loan officer.
• C. Total dollar volume of loans by loan officer.
• D. Loan default rates by loan officer.

Hiltson Hotels is a global group of hotels. The parent company, Hiltson Holdings plc employs an internal audit function which carries out audits and investigations on the individual hotels in the group.
Which of the following could the internal audit function carry out and still operate effectively?

• A. Secondment to the finance department of the Edinburgh Hiltson
• B. Secondment to the accounts department of the Singapore Hiltson to cover the maternity leave of the financial controller
• C. Special investigation into the profits of the New York Hiltson where the group directors suspect a fraud may have been carried out
• D. Identification of risks at the proposed Nairobi Hiltson, which is due to open in nine months' time

The financial statements are the management's responsibility. They should therefore inform the auditors of any material subsequent events between the date of the auditor's report and the date the financial statements are issued. If, after the date of the auditor's report but before the financial statements are issued, the auditor becomes aware of a fact that, had it been known to the auditor at the date of the auditor's report, may have caused the auditor to amend the auditor's report.
In the above situation, which of the following may NOT be an appropriate action taken by the auditor?

• A. Consider whether the financial statements need amendment
• B. Inquire how management intends to address the matter in the financial statements
• C. Issue a new audit report dated no earlier than the date of approval of the amended financial statements
• D. Discuss the matter with the management